Tax · Free tool
Section 44ADA — Presumptive Tax
Freelancers and notified professionals (legal, medical, engineering, architecture, accountancy, technical, consulting, IT) can declare 50% of gross receipts as taxable income, no books required. Receipts cap: ₹75 lakh (₹50L if cash receipts > 5%).
Eligible. Receipts ≤ ₹75 lakh (raised from ₹50L in Budget 2023, with ≤5% cash receipts).
How 44ADA works
Section 44ADA presumes 50% of gross professional receipts as taxable income. The other 50% is deemed expenses — no proof needed. You file ITR-4 (Sugam) instead of ITR-3, skip bookkeeping, skip the 44AB audit, and skip advance-tax instalments (a single 15-March payment suffices). The ceiling is ₹75 lakh receipts (raised from ₹50L in Budget 2023), provided cash receipts stay under 5% of the total.
Worked example for FY 2025-26
A Bangalore freelance software engineer with ₹40 lakh annual receipts (all via bank/UPI) declares ₹20 lakh presumed income under 44ADA. After the ₹75,000 standard deduction (new regime), taxable income is ₹19.25L — tax around ₹2.5L under the new regime. Compare with maintaining books and showing ₹15L actual profit: you'd pay tax on ₹15L not ₹20L, but lose the simplification benefit and risk a 44AB audit at this scale.
When to use 44ADA
- Freelance developers, designers, consultants, lawyers, doctors, architects, CAs
- YouTubers, content creators, technical writers with steady receipts
- Anyone whose real net margin is above 50% — presumption beats actual
- Solo professionals who don't want monthly bookkeeping or audit costs
If actual profit is well below 50% and you can prove it with books, file under ITR-3 with full expenses instead — but you'll trigger a 44AB tax audit above ₹50 lakh receipts. Small business owners (non-professionals) should use Section 44AD. See our deep-dive on freelance pricing in India for how to set rates that work under 44ADA.
FAQ
Which professions qualify under 44ADA?
Notified professions under section 44AA(1): legal, medical, engineering, architectural, accountancy, technical consultancy, interior decoration, IT/software, film artists. Authorised representatives. Other professionals can use 44ADA if their work is similar — get a CA opinion if unsure.
Can I claim actual expenses below 50%?
No. Once you opt for 44ADA, presumed income is 50%. If your actual expenses are higher (truly < 50% net margin), you must opt OUT of 44ADA, maintain books, get audited under 44AB.
Can I switch back to 44ADA after opting out?
Once you opt out, you must continue under regular books for 5 consecutive years before re-electing 44ADA. Plan carefully — the lock-in is real.